Infy revenues beats estimates

Infy had reported its results for the first quarter of FY 10 and it was able to come up with numbers to beat it's own estimates. The revenues increased by around 13% and the profits reported rose by around 18%. The total revenues for the quarter stood at 5472 crore and the profits reported were at 1527 crore. However, on a sequential basis, revenues declined by around 2.9% and the profits declined by 5.3%.

The company reported that it was able to retain business amid the global recession by paring prices and winning new orders. Infosys has been looking at acquisitions for long and it had re iterated the same. For the outsourcing companies, the winds are blowing currently from both front and back.

The front winds are coming from Obama administration which is hell bent on reducing the job losses from oursourcing. The back winds are from those corporates who are still standing after one of the worst economic downturn and are gasping for survival. They are looking at increased outsourcing to reduce costs.

Infosys has given a range of 4.45 billion USD and 4.52 billion USD for it's expected revenues in the financial year FY 2010. Basically it has increased the lower end of the estimates marginally from the ones that it had provided earlier.

Forrester research inc, Massachusetts based research company had forecasted that the US information technology market would shrink by 5% this calendar year and the global IT spending will decline by almost 11%.However, it was also expecting a very strong recovery from late 2009 and in 2010.

Infosys has won some big contracts recently. One was from Telstra, Australia's largest phone company which awarded a 352 million USD contract to Infy and EDS.

To contact the equity analyst on this story: Arun Gopalan in Chennai at Arun@hbjcapital.com

Vishal Retail- Let's understand it

Vishal Retail was once the fastest growing retailing groups in India. It had been very aggressive in opening its outlets across various parts of the country under the brand name "Vishal Mega Mart", but now it has pruned that expansion plan a bit. Vishal Retail came quite late with its IPO in year 2007, which was hugely subscribed. Such was the euphoria at that time, that people were willing to pay just about any price for the IPO. How can one forget the IPO of Reliance Power, where Mr. Anil Ambani was asking people to pay a price of Rs 450 per share for a company which had no operations, and where he himself had just paid Rs 10 for the same share.

To know more about Vishal Retail and its prospects

Plz visit:- www.multibaggerpennystocks.com

Rohit Ferro - See for yourself what excessive debt can do!!!

Rohit Ferro is a perfect example of one of those commodity stocks, which can bring you a lot of wealth during the peak of cycle and then suddenly take away almost all of it during doom. It also tells us that people start noticing debt in the balance sheets of the company, only when sentiments are down, otherwise they ignore it completely.

I have mentioned it time and again, that commodity stocks are cyclical and huge amount of wealth can be made in them, provided you invest in them at a time when the markets are ignoring them and also exit them completely at a first sign of distress. The waiting period for gains to be realized may extend up to 2-3 years, but then to enjoy the fruits, one needs to have patience.

To know more about Rohit Ferro and its potential

Plz visit:- http://www.multibaggerpennystocks.com/

Indian markets are in a downtrend, expect 100-150 points further correction in the Nifty.

The Nifty broke the most crucial support of 4,100 and closed at 4,078, indicating that fresh decline is possible in the next couple of sessions. Below 4050 levels, Nifty can even touch 3700 levels......Link
-JK, Senior Technical Analyst, SLT

RIL-RNRL dispute : Over to Supreme Court

Well, the drama has now shifted to the Supreme Court of India. Yes, the dispute between the country's top two billionaires over the sharing of gas from KG basin will move to Supreme court from 20th of this month. The finals is on and nobody has any clue as to who will take the trophy. But, whoever wins it, the bounty is really huge and is worth the battle.

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Earlier, the ruling from the Bombay high court required the gas from the fields operated by Mukesh to be sold to Anil for almost 44% less that the price that was set by the government in 2007. Since the battle is worth billions and that the government is part of it indirectly, it is widely expected that the ruling will come sooner. If the court ruling is going to be in favor of Anil, it is expected that the earnings of RIL will be affected after say 2 years time.

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RNRL was the first to file a petition in the Supreme court on July 3rd and had said that the Bombay high court has given a clear indication with respect to the price, quantity and tenure of the gas supply. The company had also requested the court to prevent RIL from selling gas to other customers as well.

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This was followed by a petition that RIL filed on July 4th saying that it cannot sell gas at a price less that what the government had decided. The company had also sought for a stay on the Bombay high court order. However, no stay has been imposed so far.

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While the tussle with the RNRL is happening, RIL is also fighting NTPC over yet another gas supply contract. Currently there is no rosy picture for RIL, since it was only RNRL and NTPC who were to be the biggest gas buyers to the tune of 40 million cubic meters of gas. RIL and NTPC had negotiated a contract for supplying gas from RIL's KG basin reserves in 2003 - 2004, but RIL later took the stand that the contract was not concluded. Clearly the stakes are very high and it seems that RNRL's gains would be much bigger than RIL's losses.
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To contact the equity analyst on this story: Arun Gopalan in Chennai at Arun@hbjcapital.com

Deccan Gold Mines ltd- The wait for the jackpot can be long

Deccan Gold Mines Limited (DGML) is the first private sector gold exploration company in India to be listed on the Bombay Stock Exchange and its also the only listed company in the gold exploration sector.

To find out, if this company has a potential of multibagger in it or not

Plz visit:- www.multibaggerpennystocks.com

Could this change the Fertilizer usage trend in India?

There have been lot of positive doses injected into the Agri space both directly and indirectly. One of them which really interested me is the move to provide subsidies based on nutrients and not based on products. Also, the other major shift is that the subsidies will be given to farmers instead of giving it to the Fertilizer companies.

Though currently there is not much idea as to how this kind of subsidy allocation would take place, these measures could make a major impact on the fertilizer industry that is currently dominated by the chemical fertilizers. However, since the proposals are not that clear currently, one must make due diligence before making any decision out of this budget announcement.

Though there are various fertilizer products that are currently available - both chemical and bio, there are only few products that are heavily sold and accepted. The reason - these are the ones that are highly subsidized and are priced at lower levels. The fertilizer companies are not to be blamed since even if they are willing to sell the less subsidized products, there are hardly any takers due to the higher price levels.

However, since the new budget proposes to change toe way of subsidy giving from product based to nutrient based, the scene is set to change with the change in prices as well.

The sale price of urea, which contains 46% of "N" is now priced at around 4830 rs per tonne. Hence this would translate to about 10,500 rs per tonne for nutrient. On the other hand, Ammonium sulphate contains 20.6% of "N" and retails at around 10,350 rupees per tonne. Hence the cost of one tonne of nutrient here would be more than 50,000 rupees. Due to the high price variation in the cost for a tonne of nutrient, Ammonium sulphate is unable to compete with the highly subsidized urea, even though Ammonium Sulphate contains other nutrients like 24% of Sulphur.

The current system due to the above mentioned price difference forces the farmers to consume "N" entirely based on Urea, ignoring other fertilizers that are available in the markets, even though they contain additional nutrients. It is highly expected that the implementation of the proposal would be able to provide more nutrients for a healthy plant growth and the fertilizer companies will be able to design products that suit various crop requirements.

To contact the equity analyst on this story: Arun Gopalan in Chennai at Arun@hbjcapital.com

Chemcel Biotech- Another company venturing into Bio-Diesel production

These days bio-fuel has turned out to be a buzz word amongst many small cap companies. There's a rush to capitalize on the business of bio-fuel and as per the declarations made by the companies, many have actually entered into long-term contracts with farmers for growing Jatropha crops in their lands, running into thousands of acres.

To know about Bio-Diesel and its nation wide implementation, and also about Chemcel biotech

Plz visit:- www.multibaggerpennystocks.com

Manappuram General Finance and Leasing - A growth story for Risk takers

Manappuram can be termed as a modern and a corporate pawn broking house. Yes, that's' what they are into. 90% of the current revenues come from Gold loans and other loans. As the title says, risk takers can consider an investment in this company and it is a high risk - high reward story. We will discuss what the company does, how they do it and some pros and cons of the investment.

MAGFIL is a kerala based NBFC having interests in Gold Loans, Security / Vehicle Loans, Foreign Exchange, Chits and deposits. Gold loans vertical is the money spinner for the company and it accounts for 80% of the revenues. This is the vertical where the company will also concentrate in the future. MAGFIL had a license to sell insurance products of almost all reputed insurance companies to its gold loan customers. However, that vertical has been sold in FY 09 to one of it's directors and that will not contribute to the numbers going forward.

For the financial year FY09, the company reported net sales of of 165 crore against 80 crore in FY 08. The net profits reported were at 29 crore as against 21 crore in FY08. The company derived around 90% of the revenues from Gold and other loans while the rest were from Asset Finance and other Fee based activities (Insurance products). Asset finance dropped from 23% of revenues to around 8% of revenues in FY 09, while the Gold and other loans portfolio improved from around 72% of revenues to 90% of revenues. This is a clear indication saying where the interests of the company lies.

The business fundamental - As many of you might know, the company looks to raise money on one hand and lend it on the other hand (against Gold). Well, money is not free and it comes at an interest. The source of the money could be a bank credit, money raised by selling bonds, issuing shares, non convertible bonds..... The Gold loan that the company disburses will also give interest returns to the company. The difference between the interest of raising money and the interest at which the company gives the loan is effectively what the company earns. The lower the interest of raising money and the higher the interest of lending, the more profitable the company is.

The following are some of the pros and cons of this 400 odd crore market company. Clearly, the rewards seem to be outweighing the risks -

Pros -
1) During the start of FY 09, the company had an ambitious plan to disburse around 10,000 crore worth Gold loans by 2014. At the end of FY 08, the company had disbursed around 1090 worth gold loans and for FY 09 it almost tripled to around 3000 crore. Hence, the target of 10,000 crore now looks smaller and could be much higher.

2) Unlike any vehicle loan or a personal loan, the gold loans are given mostly against house hold jewelry. This works positively for the company in many ways - i) House hold jewelry is considered more important to a family and there is a true urge behind the customer to repay the loan amount and get the jewelry back. ii) Since the security that the company gets for the loan is physical gold, the loan is considered to be a safer one when compared to a personal loan or a auto loan. iii) We all know how robust the gold prices have been and if the experts are to be believed the gold prices are expected to continue to quote at higher levels due to various reasons.
So, if there is a loan default, the company seems to be making more profits since the gold prices may have gone up and the company would have loaned for only 75% or 80% of the Security's worth.

3) The addressable market is so huge. I guess Indian households are believed to hold around 15,000 tonnes of Gold. Leaving out those with no houses, almost all the households contain at least few grams of gold and that is where they turn to in case of immediate financial needs.

4) More than 80% of the gold loans have values of less than 50,000 and the average gold loan is at around 20,000 rupees only. Hence the chances of big ticket defaults may be low.

5) The interest being charged is mostly 24% PA and the loan durations are shorter at 3 months.

Cons -

1) The company needs constant cash inflows to grow. No new cash inflow = no growth. Leaving out the cash from operations that is already negative due to the huge expansion that is being done, new cash inflows may come from bank credits, sale of shares and bonds.

2) The company has been growing so far, mainly due the money inflow that has been coming from various US and UK based PE funds. Eventually these funds gets converted into equity shares and hence the dilution takes place. The future growth will also be predominantly be based on PE funding and hence further dilution. More dilution, lesser EPS and hence lesser share price growth. For ex - The company clocked growth of around 100% in revenues and 50% in profits in FY 09, but the EPS growth is only 21%.

3) The revenues have increased by 100% in FY 09. This is on the back of almost a three fold jump in Gold and other loans. However, the provision for bad debts have increased by more than 5 times. Any chance of this kind of growth in the bad debts will distort the bottom line greatly.

To contact the equity analyst on this story: Arun Gopalan in Chennai at Arun@hbjcapital.com

Budget and its Impact

So, finally the Union budget was announced today by our finance minister Mr. Pranab Mukherjee. The markets did not like the budget, for sure, as evident from a sharp 6% fall in both Sensex and Nifty. It was expecting a lot, especially after The left was left out of the coalition. Investors seem to be disappointed, with what has been served to them, and therefore selling was observed throughout the day in the market.

Personally speaking, I don't see anything negative in the budget that was announced today. It's just, that the investors were bent upon a few issues and wanted to hear from finance minister on those, and since Mr. Mukherjee did not speak about them at all, so they punished the indices.

To find out more on Budget and its Impact and also on some other important issues

Plz visit:- www.multibaggerpennystocks.com